China Demographics matter

 I have posted many times how demographics matter for robust country economies.   China is a country that is about to implode this decade.  China grew what took England 7 generations in 1 generation.  That is why China was such a growth story.  But the bulk of their growth is now in the past.   This video does a good job covering the demographic story.

https://youtu.be/c1tA1WnzU9s

Why the Fed must fail

The Fed is comprised of 7 board members determining their actions into the economy.   While the FED does NOT control the economy, it does influence and affects the emotion of the financial markets. To learn more how the FED is not in control of the financial markets (but does inject emotional influence, click here.

But it is an entity, it does have about 9 trillion dollar in assets. And what the FED tries to do is to remove the variations in the market, 'stabilizing' all assets in one direction, up.   Doing this will have the long term affect of making the financial markets more fragile.  By having 9T in assets is is now a liability of the US Government, in addition to government debt.  This is how we have arrived at today.

The problem with the FED is it introduces human emotion into human financial system that thrives best with an open market.  The open market gives the feedback to companies by investment attractiveness, causing investors to buy or sell based on clear, open, evaluation of their financial health.   The open flow of objective information is essential to help analysts and investors 'judge' a company.   Since 2008, we have abolished mark to market asset valuation, removing visibility into the health of the banking system.  The Fed continues to force interest rates to a place they 'feel' is the right level.  They will not, and cannot allow the market to determine the rate, due to their emotional pressure they must act.  Since Allen Greenspan this has been the FED has taken.  Decades of intervention has brought us to today, a fragile ecosystem.

Below is a you tuber summary of Nassim Taleb book "AntiFragile". If you rather listen to the author summary, a great one is here:

Uptrend is back, what is the target?

Oct 13th was "Reversal Day", as I posted on my blog.  The best time to get in long was Friday EOD (or exact bottom Thursday!).

So what now, all clear?  I expect the market to float higher, with the bear market resuming in earnest in 2023.   I expect between Feb and May the market to start to break down, with an epic plunge between June and September.  Think Circa 2008, a market trying to fight to survive and finally throwing in the towel.

Between now and then, everyone, including me, will say the worst is behind us.  But what we started in 2019 under Trump, releasing 2 trillion in free money, will continue to ripple through the world economy.   First deflation (before 2T given away) then inflation, and now the FED is tightening rates and will trigger an earnings collapse.

The up trend should hit ~440 range as a high.  A close above 502 violates everything I am writing.
Please remember, The FED is announcing a MATERIAL change to its operations around June 2023, a private blockchain called Central Bank Digital Currency (CBDC).  This is the first step to overhaul all money in the world based on Dollars to centralize control to the FED.  NEW tech takes time to be effective, it isn't flipping a switch, so I think the market will follow the pattern I outlined.

I added a purple line that I expect the market may return to, but not pierce on a closing basis.  Even if the market does pierce, it doesn't violate the thesis.   What will indicate a market decline is breaking the lower dashed horizontal green line.  Once that happens, US equity indexes is the last place your saving should be in.  The Market will decline to the up sloping green line, then  bounce again, then on a turn around could go down a full 80% on SPY from the top made in Dec 2021.  I'll do another post on what my plan is for safety.

Reversal day

Quick post, we opened lower from previous reversal, but closed much much higher, this was THE reversal that I was expecting, it was a long bottoming process.   It could be a reversal that lasts for a year before hitting our much lower destination.   If you like going long, buying Friday SPY, with a stop of yesterday’s low of 349 as a stop loss.  Good luck!

Mondays Decision, no Market breakdown!

 Friday ended below the line I called out as the 20% lower line, but not by much.

Monday was decision day, and the market is now back into bear rally mode.  However, until the January high is broken, we are in a BEAR market!  So I do expect much, much lower market, but it could be out to fall of 2023 now.

I added a purple line now, and if the SPY closes BELOW 357 on a CLOSING basis, its is finally, game over and a material run lower will happen.  Until then, playing the bull is fine, and I may on occasion go long items.  This rally is a gift to exit long positions, pick your level between 385 to  400ish range.

If you are very optimistic, then a break above the red downtrend line is the first step to BREAK this bear market.  Until that happens, its pure hope, no chart or price support for that point of view.  I'll put some short on if/when we get near 400 for the next material down swing.  Good luck!

Decision day is now THIS Monday?

 It has been 5 DAYS and the market can't break lower!   The S&P 500 has pierced the June low 3 times, but NOT on a closing basis!

Other indexes, not the S&P 500, have made NEW LOWS on a closing basis.  But the SPY is the primary hold out.    The news has been trumpeting new lows, which in charting is really bad at this stage, to scare investors to sell. 

But if its such a terrible market, why is the S&P 500 levitating for FIVE DAYS above the June low, barely, on a closing basis?  This is why I use the SPY as a gauge, it has a broader representation on the core 500 companies in the USA.

The market is either trying to build energy for an epic fail, which would likely be Monday morning, or a 'come back'.  .

This weekend is shaping up to be the decision.  I wrote a week ago we would know Monday, but here we are!  Who could have guessed multiple market indexes would fail, but not the SPY 5 days later?

Don't get me wrong the US and world markets will be sliced 20% lower in the next 6-9 months, and I think 70% lower from here is in the cards.  But for now I am looking to get short on a rally, I may buy some short instruments today incase Monday is the epic fail, but without leverage.  The leveraged ETF's should get hammered on a relief rally due to the various indexes failing this week, and running 'time off the clock' 5 days later.

Charting wise an SPY closing below 362 its bad, indicating going lower 20% in quick order.   But dancing on this June low for 5 days makes a 'new low' squishy now, this line doesn't have the same meaning as it did on Monday.  There is now wiggle room!

A perfect close will be 359.50-361.90 range, making it a coin toss for Monday, nobody will go all in in either direction unless you like to put your life savings on lottery tickets hoping to pay off.

A break below 359.50 on a closing basis is as good as any bet you could make that there WILL be in quick order a 20% haircut! 

Good luck!

Target is 30% lower from the high

I have been posting about the critical points in the market decline, and is has been triggered.

The market has broken the trend line in place since the low in March 2020, I expect fall of 20% lower from here is in the cards.  If you are more optimistic, a VERY strong confirmation is breaking the SPY low of 363 in June 2022 on a CLOSING basis, we are headed to ~300.  IF we break the up trend in place since 2009, on a CLOSING basis, we can see an 80% stock market collapse.

I don't think we will break the up trend since 2009 for a bit, maybe in a year (if ever).

Click on the chart at bottom for greater detail.

So if you want to catch a falling knife, a good place to go from cash to the market is on the up trend from 2009.  The question is what to buy? Why the future of course!

My current list:

India
Mexico
Artificial intelligence & Robotics
Crypto financial companies - SERVING the existing banking system,
Gold / Bitcoin / US Bonds  mix.

Monday is Decision day!

 EOD of Friday the market was 'saved' and it recovered above the line I have been posting about.

Over the weekend the Fed asserted the next raise maybe 1%.  I believe this was done specifically to try to get the market to tank at this critical level.  Why? Because the Fed DOESN'T want to keep hiking rates, but believes it does if we are seeing markets ignore their efforts and inflation comes in higher.

They want to craft a story that when the Fed raises rates, markets and inflation falls.

Today we will get our answer.  Can the market close above the line yet again? If it does the bull is resuming!  If we are below the line today, I wouldn't go all in short just yet.  We need some follow through.   Cash is best right now, good luck!

Breaking support - 20% decline ahead?

 Today is quadruple witching, and this morning we are breaking the trend line I posted about.
If we are going to reverse it will be by EOD today or Monday with an "event" announced over the weekend for a 'save' breaking the trendline.

By EOD Monday we will have a definitive direction of the market, 20% lower ahead or a rally for a bit, perhaps into the midterm elections?

Take bets, get rewarded big (long or short) or wait for the directional choice.

Good luck.

Closer look at support levels

 If you haven't read my previous post Meaningful Support levels, please do so before reading on.

I wanted to pull in for a closer look at the support level, if broken, on a market CLOSE (not a open below and closes above, etc) we can expect a meaningful stock decline. Depending on when, the close must close below the green rising line, range of S&P 500 385 (tomorrow) -395 (oct 24th).  A break above the line is a bullish indicator.

This trend line up has been in tact since March 2020.  A close below we should expect the market to decline by a full 20% over the month(s) following.

On a positive note, the world is worse off, much much worse off than USA.  For this reason, we may see INFLOWS of capital into USA and we may resume the bull for up to 9 months ahead.  I am not convinced the market will fall 20% in the near term.  This is a watch and wait to understand the direction.

Meaningful Market Support Levels

The chart below is the S & P 500 support lines.  Red lines are resistance, if the market breaks above it on a weekly closing basis, we have a bull case for the market.  A break below green support lines, the bear will roar.  

Below this summary I have the details.  Given above we are about 2% striking distance downward to first support, but if broken, another down of 20% from current levels on the index.  That level if ever broken is entering the realm of panic.  On the upside if sold today, you would 'miss out' on 10%  gain before the all clear to buy.  

Details

As I write this, S & P is at 390, the first major support line is at 383ish.   A break below will have a next support at 300-315 range (depending on time).  That is material support and should have a multi year recovery.  Breaking below that is dismally lower at 120 ish. ( depending on time).

On a positive note a break ABOVE 429 is very bullish, and on a closing basis a good risk to buy.  Obviously anything above the all time high is pure bull run at  481.  

Action

Take note of the levels above, they are critical for the health of your 401K.

NOTE: I Purchased RGLD today at 90, since the Dollar is strong, euro weak, gold is weak.  For risk v reward we need stronger dollar, weaker euro, weaker gold price.   All have moved to extremes already, I am trying to catch a falling knife. :)

Market top is in!

Friday was brutal, I expect a generational paradigm shift has arrived in our global economics.  The world Baby boomer generation is now more retired than not, and we are seeing shrinking populations for the rest of our lifetimes. (excluding India and a few other countries).

China has a material demographic issue both with aging population and retreating population totals.  China officially expects to hit 800 Million people in 2082 from current 1.4 billion.  Unofficial numbers advance this materially to as soon as 2050.

With the world population peaking sometime in the next 40 years after major population growth the past 100 years, our economic system isn't built for it.  This will result in global currency wars (already in progress) and a world searching for something to invest for growth.

Right now the market topped, and I am now selling all my long assets tomorrow, with a few exceptions.  Goldman Sachs agrees as it sells over 140 billion in the month ahead.  If/when the SPY closes weekly ABOVE 410 in the 'next few months', I'll reverse my opinion. I expect since everyone is invested in index funds, and automatic trading may kick in to conserve assets.
I'll also become a buyer if/when the market makes a substantial low, to play the long side for a time.  I expect an intermediate low around the elections.   
Over the year ahead I do expect a real low to be 50% lower than here, if not 80%.   But nothing runs in a straight line!

This is what I have been obsessing over since August 2006, the fourth turning that is upon us.  I don't have any easy investments answers except 'risk off' is the motto.

Good luck.

Economic repression since 2007

Since 2007 western countries have experienced economic suppression.  I can't say exactly what it is, but I think generally the global economy has been resting on the baby boomer generation for growth.  And in 2007 the first baby boomers hit 61.  This means the start of baby boomers retiring was well underway.  Remember many baby boomers got pensions from private and public sectors and can retire as early as 55.   In 2022 the oldest baby boomers are hitting 58, meaning, we are experiencing the last of the boomers retiring.   The majority of boomers are retired as of 2022.

These people are retiring at the peak of their earnings, lowering tax collections while simultaneously requiring more public services.

Below is a great video talking about analysis of England's productivity.  The personal financial growth from 1992 through 2007 if it continued through 2022, people working today would be  33% economically better off.  People who entered the workforce from 1945 through 1992 are materially better off.

If you are after generation X, you are at a material disadvantage than rest of society.  So when we look at the stock market, this is all a reflection of an economically sick society.

I recommend this video to get a sense of the economic disadvantage and how democracy is being undermined by the diminished economic opportunity.

Bull Market Alive

 Death of this bull market I think has been premature.  I covered my shorts, and went long early last week (a tad bit early).

This final bull hurrah is the precursor to the final multi-year decline.  What happened over the last few months is EVERYONE became bearish.  As a contrarian that invoked my interest to look at the youtubers I follow for feedback.  Two of them called for a reversal, and one of them is even calling for approaching and/or making new highs.  I am unsure if we will get to new highs, but what I do know is for a multi-year low, everyone must be sucked into the market before the decline can start in earnest.

I will post the investment strategy I am looking to execute on for the next 5-10 years in anticipation that the world will see great growth, it just may not be in the USA.

China is NOT going to get out of this anytime soon, India is what I am looking to invest in.

In any case , I went long ARKK and TQQQ.  I did take some off the table at the close today in anticipation nothing goes in a straight line.

Good luck!

Fed, US , Russia, China

Back in 2008 I posted about how the reserve currency of the world changes every ~100 years.  The USD has passed 100 years since the Federal Reserve was created, but we still have until 1932~1944 for USD to hit 100 years as the official reserve currency.   Looking ahead, The Fed, US Government and Russia/China know our 'kick the can' debt machine will run out of runway in the decade(s) ahead.

In advance of this event, Russia/China have been purchasing gold, and in the case of China banned Crypto currencies.   The US and FED knows this.

So if the world will eventually move off of the USD, what is the best options for the US to align as the new reserve currency?  Gold is terrible as it puts control to who can dig gold up quickest, and it isn't easily useable in international exchange.   China/Russia currency puts the world at the mercy of dictatorships.

In steps Crypto!   The FED asked for feedback on crypto USD, signaling the future of the USD.  Making USD into crypto alone doesn't change the world, as it could be viewed as similar as Tether. What will be a change is when ALL USD is only valid if on the USD blockchain.  When that occurs, the government could in seconds stop all USD change with any nation, like Russia.  Each movement of dollars could be tracked down to the penny of who sent money to who.  That is a game changer.

Some have speculated the USD may ban Bitcoin, I don' think so.  They can bury Bitcoin with regulation, taxation, or other measures.   Bitcoin must survive as a 'plan b' for the USD world reserve currency (store of value, not actually a currency) for international banks to exchange reserves.   This could become the alternative to USD for 'reserves' only, not for actual money per say.

Last night, 3/9, Biden issued an executive order on Cryptos.  While itself doesn't say much, the timing is huge.  Russia is trying to take over the Ukraine, the US is doing everything it can to financially punish Russia, and Biden just signaled to the world, the US is moving forward.  Russia and China will be offering a backward look, gold and central control.

The world will need to choose in the years ahead.  Go Crypto!

The jump the shark moment?

The Federal Reserve bank just froze bank reserves within Russia.  This step has been taken before from what I read in WW2.  We are dancing on the edge of something big in the USD financial system.  Dare I say that the cascading consequences of asset devaluation in Russia, and counter party risk, plus assets unable to pay debts, we are lighting a fuse.

I know the US must take such steps to discourage Russia from aggression.  Ukraine is paying the highest price right now, but the world may also suffer with economic consequences.  I still think the market rebounds to form a mega right shoulder, but it wouldn't surprise me if the market throws in the towel from here.

Changing World Order, by Ray Dalio

 Ray Dalio is a world leader in financial markets, as head fund manager of Bridgewater Associates, managing over 140 Billion dollars.  I am very pleased to share a well done summary of how our current global finance fits in the the history over the last 500 years.

History doesn't repeat itself exactly, but patterns do exist.  This is true simply because age old issues humanity faces are consistent across our entire history.  The shape and situation varies, but human social and economic problems are never resolved.

The last post was on effects of QE and the financial suppression (not expansion) it promotes.  This video puts into context the forces driving central banks to repeat the failures of the past.

Does the FED print Money?

 I have been watching Emil Kalinowski for about the last year, he does a fantastic job as a youtuber talking about Macro economics and the banking system.

This excellent video really digs in about the FED QE effects, they do NOT print money, they only generates bank reserves.  Most people believe FED QE promotes economic growth, in reality it is financial repression every time they do a QE.  It does promote existing wealth, not new growth.   
Grab a cup of coffee, grab a seat in a quiet area, it is a dense listen.

Economy is hot, market new highs before breaking?

 The economy is on fire, with hiring at huge pay increases.  That's good right?

Well, for the Federal Reserve Bank, the worst situation is run-away inflation.  That is the only way for the US dollar to become no longer the store of value the world depends upon.   There are soo many bonds out there, that if fear truly took hold, we would see rates catapult quickly as treasuries dump.

So the FED is forced to throw water on the economy.  The top 0.05% of the wealthiest are looking further out than the vast majority of investors.  IF (this is an IF) the FED must take aggressive action, the wealthiest will dump as it becomes more apparent the FED must take action.

The saying is Never fight the FED, well, this is the same for up and down for the market.

But I do think the market will move higher first.
The purple outlines the 'head and shoulders' mega topping pattern we may be seeing unfold.
We had many people in total fear, since the top, and huge fear with Russia.  Russia will pass, America will open up from COVID, and I think we get a nice bounce into the summer, then fail hard core before the elections.  The top is still likely in, simply because as the market tries to make new highs, there will be more dumping by the top 0.05%.  Good luck!

The wheels of time turn slowly

 It may seem like the market whips around with amazing volatility, but that is only if you are watching it daily.  Pulling back, the topping pattern and decision to fail or recover takes months, if not years! We have been within a market 10% range for 10 months!   I still have 99% conviction unless there is free money from the government issued to the people, we will see a deflationary decline.  Why? Because the market advanced on an 6 trillion dollar spending spree, and removing that funding will over time deflate.   Also because costs across the board are up, which means less can be bought by the average person.  And finally, the FED is trying to choke the system by raising rates and reigning in free money.

The question is, can things turn around before we deflate?   We need free money, when that happens, the bottom is near.

Looking at the charts, we are waiting for a break below SPY 417, until that happens, we are in a range, enjoy the ride.  Target is SPY about 330.  The charts say it should go to the lowest green line below, but I am now thinking that far down free money will resume first.   Maybe with Fed Crypto Dollar. 
 A break above the red line it is a bullish turn.  Good luck!

Pulling back even further, the easy money policies under Trump fueled this entire rally!  Biden has yet to pass ANY budget!  Trump brought tax cuts, tax breaks to bring money back from overseas, government 1 trillion debt spending for 2019, then the 6 trillion spending bill in 2020, and in 2020 interest rates going to near zero.   All the easy buttons are pressed! Biden needs the republican support to continue free money policies extending from Trumps policies, but I don't see that happening without a major financial crisis.

Chart support and Market failure of 40% plus

First, I am confident the market will be cut in half from the highs, it may take a year or two, but we will get there.  Since there is no rush to get there, its important to look for bounces to unwind longs and/or go short.

The market created a failure last week, there is a new "lower lower" vs a "higher high", the market character has changed.  We are now in a bear market for the next few years, like it or not.   There are ways out, for example, if congress issues 8 or 16 trillion dollars in debt to match or exceed the money spend on 2020, the market will go to new highs.   With Democrat's in office there is zero chance of deficit spending to this magnitude, that only happens under Republicans in office.  This isn't a about which party is better, its simply a fact, look it up. (since Reagan, before it was the opposite)
I'll write up more what's ahead, for now these are the areas to watch:

S&P 500 close below 417 and the market is going down hard.  First support is 433, I think we may bounce off of it this week (today?).  To learn more watch the first half of this video.  High level picture of the market failure (top green line) and the target (bottom green line) and we may pierce that one.

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Another you tuber worth watching, he is typically very positive.

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Oh, and there is calls for dollar rally, I think this is true, but it will be interesting when we must get off this train.

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Pandemic Ending

 I believe in about two weeks, the pandemic is over!  COVID will be around decades.  But the pandemic phase is ending, just in time for St Pattys!  I’ll post graphs in a week or so to document the end of this scourge! 

Are you ready for a 5 to 10 year stock market high?

Since 2006 I have been concerned about the day the market makes a long term top, and we are finally here.  For me its pretty odd, as I have no magical place to put investments.   I do have some in Bitcoin, which should be cut down to $20K again, (an eventual upside I still think is 100K and higher), Gold miners should also be brutalized.   I expect flight to Bonds to eventually happen causing rates to collapse and bond values to skyrocket.  AFTER that happens, we could have a dollar crisis.  

The problem is when is the top, has it passed? Is it this week? The motto is 'don't fight the Fed', and they are about to taper.  That should help create resistance and may inadvertently trigger a market downturn, like the great depression.

We think there is inflation, and there is, from distribution and resource constraints.  But that isn't monetary inflation, so with the FED initiating steps to curb inflation, it is a mis-read that its money inflation.

Don't believe me, lets take a look at the USD value index.

The US dollar is around 1996-2002 levels, hardly a crisis. (yet!)

The question is how to navigate the transition period ahead, as previously mentioned, we have historic margin in the market, with insider selling at record highs.  That means the public is buying stocks with borrowed money while the corporate insiders are selling.  Even Mr. Musk and his brother sold a bit of stock near the high.

Long term, I have huge faith in buying INDIA ETF's, I'll end up putting a chunk into India, I'll post the ETF's when I do.  I also have some in JEPI, hoping it fare wells with market turmoil over time.

A couple of videos related to this.

Small Caps about to crash

Cycle analysis, potential double top in Nasdaq. 343 by March

VIOLENT swings on the SP500 ahead.

Layoffs and Bear Market head

A Cancelled January

UPDATE: 1-9-22

NYTimes has generally confirmed what I below wrote 2 days later.

https://www.nytimes.com/interactive/2022/01/09/us/omicron-cities-cases-hospitals.html?referringSource=articleShare

--

 As a follow up to my last post, A Cancelled Christmas, I'd like to review how things have progressed in the last two weeks with a series of charts.

USA

NJ 

NJ has reported about 180,000 cases since Jan 1st.

Florida

Florida has reported 320,000 new COVID cases since Jan 1st.

ICU availability in Florida

I couldn't find a chart of ICU stats that cover all of Florida.  But I did find an interactive map, and I took a snapshot around "the villages", currently at 74% ICU bed usage.   Remember, people go to the ICU after fighting COVID for days or weeks before it gets that bad.    For example, two weeks ago there was 2,000 COVID patients in the hospital across Florida, today its over 8,000.  That means in two weeks we should have 5,000 to 32,000 patients in the hospital, depending when the peak hits.  If the peak is a week out, I would assume hospital capacity will be reached.

It shows 31 hospitals with average 9 available ICU beds = 279 

Image below.

ICU availability in NJ

Using the same approach for NJ, I covered the NJ/Staten island area to avoid NYC hospitals.  The ICU occupancy is 45%, with average 26 beds over 38 hospitals for total of 988 available ICU beds.

Image below.

Final thoughts

COVID is everywhere, I know over a dozen people right now that have COVID.  The VAST majority its not a life threatening illness when vaccinated with a booster.   My continual concern isn't about getting COVID and dying, its getting COVID at a time hospitals are stretched, and due to lack of capacity dying or having a more severe illness.

So in the spirit of a cancelled Christmas, its a Cancelled January!   But I do expect we are about to see the peak and the final hurrah of this plague.   I will eventually get COVID, my goals is to catch it as as the hospital capacity is opening up rather than filling up.

Good luck!